British dairy farmers are facing into a period of heavy losses this winter as milk prices continue to slide well below the cost of production, a senior UK dairy analyst has forecast.

Nick Holt-Martyn, principal consultant with The Dairy Group, said the vast majority of dairy farmers in Britain were already operating well below break-even – which he put at 45-47p/l (51-53.5c/l).

And he predicted that milk prices were likely to take a further hit in January as the spring flush milk was coming on the horizon.

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“Price are heading south at a rate of knots at the moment, and the problem is that we can’t see the bottom yet,” Holt-Martyn told the Irish Farmers Journal.

“What we’ve seen in the UK is a massive spread in pricing. We’re seeing from as low as 33p/l (37.6c/l) up to 42.87p/l (49c/l) at Arla for November. So, there is a 10p/l range in prices at the moment, which is massive,” he said.

The price variations between processors reflected the extent to which individual companies were exposed to the European and British markets, the Dairy Group analyst explained.

“The European market has seen a decline in butter fats, and skim [milk powder] as well, whether the UK market has seen the bottom fall out of the mild cheddar price,” Holt-Martyn said.

“The mild cheddar price has really caught a cold over the last two months. Obviously that underpins mature cheddar and that has hit the Irish as much as the British milk price.”

The collapse in milk prices is inextricably linked with supply, Holt-Martyn maintained.

A recovery in milk prices would not come until output reduced, he claimed.

“The UK has posted plus 7% year-on-year growth in October, and the EU as whole was plus 5% in September. It’s not possible to see the bottom because you need a reaction on the supply side for the market to stop falling,” he contended.

“This is the dilemma for individual producers. It is not in their own interest to cut their production but it is in the interest of the industry that they do,” Holt-Martyn said.

Given that milk output is extremely unlikely to fall in the short-term, the Dairy Group analyst believes prices will continue to slide in the medium-term.

“My expectation is that there will be quite a sharp reduction come January,” Holt-Martyn predicted.

“A lot will depend then on what happens on the supply side,” he added.

Given the level of losses that could potentially be coming down the road, Holt-Martyn maintained that “people will be looking very seriously at whether they stay in production”.

Farmer efforts to mitigate future losses could see a lot more cows grazed outdoors during the spring and summer months as dairy units move away from the high cost of full-time housing, Holt-Martyn said.